The Draw of Higher Interest Rates, China’s Lockdowns and Effects on Supply Chain, Pandemic Era Fiscal Policy’s Impact on GDP
April 22, 2022 | FIRESIDE CHARTS
Investor sentiment is reaching dire levels. The U.S. 10-year Treasury Inflation-Protected Securities (TIPS) yield is in positive territory for the first time since 2019, as higher interest rates bolster the investment case for fixed income. Homebuilders are having trouble completing houses, but reports that supply bottlenecks are beginning to improve have increased despite the massive disruptions in China. Most of the governments pandemic spending is over. Lower government spending will be a headwind to the economy in the near term, but the crisis era programs accomplished at least one goal—consumers balance sheets strengthened during the pandemic. What’s driving growth in the global semiconductor market?
1. Drawdowns in both equities and fixed income have led to the lowest bullish reading since 2005:
Source: The Daily Shot from 4/15/22
2. The market expects current interest rates to exceed future inflation:
Source: The Daily Shot from 4/19/22
3. All else equal, higher interest rates make fixed income more attractive relative to equities:
Source: The Daily Shot from 4/14/22
4. Homebuilders are still starting new houses, despite trouble finishing them:
Source: Mizuho Securities USA
5. While net sentiment (getting better – getting worse) is still negative, there’s a glimmer of hope:
Source: @EricFinnigan
6. Continued lockdowns in China are sure to disrupt supply chains, if they haven’t already:
Source: BCA Research
7. Remaining pandemic era fiscal expenditures will be just over 2% of GDP this year, and fall to under 1% of GDP next year:
Source: Goldman Sachs; @MikeZaccardi
8. Such a large reduction in fiscal spending is a major headwind for GDP:
Source: @WSJ Read full article
9. Households now hold more cash than debt for the first time since the early 90s:
Source: Deutsche Bank Research
10. The connected economy is made possible by semiconductors:
Source: McKinsey & Company Read full article
Disclosure: The charts and infographics contained in this blog are typically based on data obtained from 3rd parties and are believed to be accurate. The commentary included is the opinion of the author and subject to change at any time. Any reference to specific securities or investments are for illustrative purposes only and are not intended as investment advice nor are they a recommendation to take any action. Individual securities mentioned may be held in client accounts. Past performance is no guarantee of future results.